Patriotism in Your Portfolio

Abstract:     
More patriotic countries have greater equity home bias. In a panel of World Values Surveys covering 53 countries, measures of patriotism are positively related to home bias measures after controlling for transaction barriers, diversification benefits, information and familiarity. Changes in patriotism vary with changes in the home bias. The results are robust to using ISSP measures of patriotism covering 24 countries and within-U.S. data from the Survey of Consumer Finances. Instrumenting patriotism with social variables uncorrelated with economic and political factors confirms that patriotism affects investment. The average country invests $18 to $30 billion more abroad with a one standard deviation drop in patriotism.

Keywords: Home Bias, Patriotism, Behavioral Finance, International, Investment

JEL Classifications: G11, G15, F21

Working Paper Series